Question 2 (32 marks) P obtained control over S by purchasing 65% of its outstanding voting shares for $251,875 on December 31, 2012. P records its investment in S on the cost basis and uses the fair value enterprise (entity) theory. At that date, S had common shares of $150,000 and retained earnings of $110,000. At the date of purchase, P assessed S's plant assets at $32,000 over their net book value. In addition, P noted that patents valued by S at zero actually had a fair value of 36,000. The plant assets had a remaining useful life of 8 years at acquisition date; patents had a remaining useful life of 12 years. Goodwill created upon purchase is tested for impairment at least annually. Additional Information: a) At December 31, 2016, goodwill had a recoverable (unimpaired) value of $$46,000. The impairment loss occurred in 2016. b) At December 31, 2016, patents had a recoverable (unimpaired) value of $21,750. The impairment loss occurred in 2016. c) On December 31, 2016, P declared dividends of $40,000 to its shareholders. On that same date, S declared dividends to its shareholders of $25,000. d) Amortization expense is included in "selling expenses"; impairment losses are included in "other expenses". Income Statements for the year ended Dec 31, 2016 for both P and S are below: P S Sales $926,000 Cost of Goods Sold (738,000) $615,000 (460,000) Gross Profit 188,000 155,000 Selling Expenses (25,000) (39,000) Other Expenses (115,000) (70,000) Interest and Dividend Income 48,000 4,000 Net Profit $96,000 $50,000